1,721,086 research outputs found
Dirty money
No full textAn inter-governmental body is encouraging the replacement of currency with the objective of discouraging illegal economic activities. This policy is analyzed in a search-theoretic model where individuals choose legal or illegal production, settle trades via monetary or costly intermediated exchange, and where the government imperfectly monitors monetary transactions. Stationary monetary equilibria with both legal and illegal productions exist, case the over-provision of currency may increment the extent of illegal production. This result holds also in the presence of intermediated exchange of legal goods. Equilibria with differing transaction patterns and degrees of illicit activities coexist
A perspective on electronic alternatives to traditional currencies
No full textThe institution of money is rapidly evolving thanks to developments in
computer-based cryptography. Technological advances have made possible the
creation of cost-effective electronic alternatives to banknotes and coins, which
are the traditional physical currencies. This document aims to describe — based
on scientific literature — the use and characteristics of money, some of the
problems associated with issuing a new currency or a new payment instrument,
and the possible comparative advantages of a central bank in leading the way
relative to private issuers
Money, search, and costly matchmaking
No full textI examine the robustness of monetary equilibria in a random-matching model, where a more efficient mechanism for trade is available. Agents choose between two trading sectors: the search and the intermediated sector. In the former, trade partners arrive randomly and there is a trading externality. In the latter, a costly matching technology provides deterministic double-coincidence matches. Multiple equilibria exist with the extent of costly matching endogenously determined. Money and "mediated" trade may coexist. This depends on the size of the probability of a trade, relative to the cost of deterministic matching. This outcome is inferior for an increasing-returns externality. Under certain conditions, regimes with only costly matching are welfare superior to monetary regimes with random matching
Distributional aspects of the divisibility of money: an example
No full textI highlight the importance of the distributional aspects of money’s divisibility by comparing a search-theoretic model with random transfers of indivisible money balances, to one with deterministic transfers of partially divisible balances. Randomization allows price flexibility, as if money were fully divisible. Partial divisibility does not, but allows money redistributions. An example of the relevance of such ‘extensive margin’ aspects of divisibility is provided. Copyright Springer-Verlag Berlin/Heidelberg 2005Divisibility, Lotteries, Money distribution, Search.,
Search, Dealers, and the Terms of Trade
No full textI study a search theoretic model with pairwise meetings where dealers arise endogenously. The extent of intermediation depends on its cost, trade frictions, and the dealers' ability to negociate favorable terms of trade. Under Nash bargaining, there is a unique equilibrium where dealers buy and hold the low-storage-cost good and, depending on their relative bargaining power, resell it at a premium or a discount. The distribution of the terms of trade is non-degenerate unless storage cost and frictions vanish. Due to an externality created by intermediation, the efficient allocation can be achieved only if dealers can charge a positive markup. (Copyright: Elsevier)Search, Intermediation, Prices, Bargaining
Replication Data and Code for: Tokenization and interconnectedness: a numerical exploration
No full textThe programs replicate tables and figures from “Tokenization and interconnectedness: a numerical exploration”, by Camera ang Gioffre'. Please see README.pdf for detail
Price Dispersion with Directed Search
Full text linkWe present a model that generates empirically plausible price distributions in directed search equilibrium. There are many identical buyers and many identical capacity-constrained sellers who post prices. These prices can be renegotiated to some degree and the outcome depends on the number of buyers who want to purchase the good. In equilibrium all sellers post the same price, demand is randomly distributed, and there is sale price dispersion. Prices and distributions depend on market tightness and on the properties of renegotiation outcomes. In a labor market context, the model generates a strong empirical prediction. If workers can renegotiate the posted wage, then the model predicts a positively skewed and realistic-looking density function of realized wages when the mean number of job-seekers per vacancy is large
Trading Horizons and the Value of Money
Full text linkThis paper shows that flat money can be feasible and essential even if the trading horizon is finite and deterministic. The result hinges on two features of our model. First, individual actions can affect the future availability of productive resources. So, agents may be willing to sell for money, even if on that date they have no reason to accept it. This makes monetary trade feasible in all preceding dates. Second, agents are anonymous and direct their search for partners. So, gift-giving arrangements may be prevented because agents can misrepresent their consumption needs. This makes money essential in exploiting any gains from specialization and trade
Dynamic directed search
Full text linkThe directed search model (Peters 52(5):1117-1127, 1984) is static; its dynamic extensions typically restrict strategies, often assuming price or match commitments. We lift such restrictions to study equilibrium when search can be directed over time, without constraints and at no cost. In equilibrium, trade frictions arise endogenously, and price commitments, if they do exist, are self-enforcing. In contrast to the typical model, there exists a continuum of equilibria that exhibit trade frictions. These equilibria support any price above the static price, including monopoly pricing in arbitrarily large markets. Dispersion in posted prices can naturally arise as temporary or permanent phenomenon despite the absence of preexisting heterogeneity
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